IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v69y2025i2d10.1007_s00181-025-02754-9.html
   My bibliography  Save this article

Decomposing supply- and demand-driven inflation in Turkey

Author

Listed:
  • Okan Akarsu

    (Central Bank of the Republic of Türkiye, CBRT)

  • Emrehan Aktuğ

    (Sabancı University)

Abstract

We document the demand- and supply-driven components of inflation in Türkiye by following the decomposition method of Shapiro (J Money Credit Bank, 2024). The results suggest that the recent surge in inflation, which began with the COVID-19 pandemic and deviated significantly from global inflation rates, reaching as high as 80%, was initially driven by supply factors. As monetary policy loosened, demand-driven inflation also increased; however, throughout the post-COVID period, supply-driven inflation consistently exceeded the demand-driven component in this high-inflation environment. Consistent with theory, oil supply and exchange-rate shocks increased the supply-driven inflation, while monetary policy tightening reduced the demand-driven inflation. This decomposition can potentially serve as a useful real-time tracker for policymakers.

Suggested Citation

  • Okan Akarsu & Emrehan Aktuğ, 2025. "Decomposing supply- and demand-driven inflation in Turkey," Empirical Economics, Springer, vol. 69(2), pages 1047-1077, August.
    • Handle: RePEc:spr:empeco:v:69:y:2025:i:2:d:10.1007_s00181-025-02754-9
    DOI: 10.1007/s00181-025-02754-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00181-025-02754-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s00181-025-02754-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:69:y:2025:i:2:d:10.1007_s00181-025-02754-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.